Specific Exclusion Clause In Agreement Renders Dispute Non-Arbitrable: Punjab & Haryana High Court

The Punjab and Haryana High Court bench of Justice Jagmohan Bansal has held that when there is a specific exclusion clause in the agreement, the matter shall not be referred to Arbitration. Brief Facts The applicant filed this application under section 11 of the Arbitration Act, seeking appointment of the Arbitrator. The present application was filed on the basis of an arbitration clause contained in the Custom Milling Policy, 2018. There is a clause in the agreement which stipulates that cases involving fraud, theft, or misappropriation by the applicant are not arbitrable and are subject to legal proceedings. An FIR was lodged by the respondent against the applicant alleging misappropriation of paddy and the matter is pending trial. It was submitted by the applicant that the court under section 11 cannot check whether the matter is non arbitrable or not as per Supreme Court judgment in Vidya Drolia v. Durga Trading Corporation (2021). It was also argued that the dispute will not become non arbitrable on the ground that allegations of misappropriation were raised as per fourfold test established by the Supreme Court. Observations: In Vidya Drolia (supra), the Supreme Court while propounding the test of Non-Arbitrability has held that “exclusion or non-arbitrability when clearly expressed would pose no difficulty and should be respected. When cause of action and subject-matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable.” In light of the above, the court observed that where there is specific exclusion clause, the matter should not be referred to Arbitrator. There is allegation of misappropriation of paddy belonging to the State. The allegation against the applicant is that he has committed an offence of breach of trust. It is not offence against an individual whereas alleged offence is against the State. Public money is involved, thus, there is need of adjudication by Courts instead of Arbitral Tribunal. Case Title:M/s Ganpati Rice & General Mills Versus Haryana State Cooperative Supply & Marketing Federation Limited and another Case Number: ARB-227-2019 (O&M) Judgment Date: 10/12/2024 Click Here To Read/Download The Order

Specific Exclusion Clause In Agreement Renders Dispute Non-Arbitrable: Punjab & Haryana High Court

Mohd Malik Chauhan

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